1. You are analyzing a risky bond portfolio and believe the annual default rate will average 5%, and its Loss given Default will average 60%. The portfolio has a contractual yield of 7.5%/year. What is the portfolios expected annual yield?
2. Teslas Zero-coupon bond trades right now for $652. It matures in exactly 5 years. What is its market yield? (Your answer should be a % carried to 2 places.)
3. You are analyzing Superior Corp for Fidelitys Super Growth ETF and have projected the dividends, share buy-backs and future market cap for the next 4 years. Dividends/Buybacks are expected to be: $100/$200 (Year 1); $105/$218 (Year 2); $111/$240 (Year 3), and Market Cap $3,600 (Year 4). You have estimated Superiors Required Return to be 8.5%. What is the estimated current market capitalization for Superior now? Before any calculations, draw a timeline. (Note: $ in Millions.)